(Sharecast News) - Kibo Energy announced a 10-year take-or-pay conditional power purchase agreement on Monday, to generate baseload electricity from a 2.7 MW plastic-to-syngas power plant.
The AIM-traded firm said the plant would be built, commissioned and operated for an unnamed industrial business park developer in South Africa's most populous province, Gauteng.
It said the project would be the first project under its Sustineri Energy joint venture, which is 65% held by Kibo Energy, with the balance of 35% held by Industrial Green Energy Solutions (IGES).
The project would provide the client with cleaner electricity, Kibo explained, by using a high temperature pyrolysis process in which selected non-recyclable plastics would undergo thermal degradation to produce high quality syngas, which would in turn feed gas engines to generate both electricity and heat energy.
Additionally, there was potential to sell the heat energy generated as a byproduct from the gas engines directly to customers inside the industrial park.
Based on the optimised financial model, Kibo said EBITDA of ZAR 388m (£18.89m) over the life of the project was expected, for an installed capacity of 2.7 MW.
Of that, ZAR 252m would be attributable to the company, with potential to expand the project to around 8 MW installed capacity in the future.
It projected an internal rate of return between 11% and 14% per annum, based on the initial installed capacity of 2.7 MW.
Kibo said the project would reduce plastic pollution to produce sustainable energy, by using "selected and specific high-calorific plastic" as fuel feedstock, which could no longer legally be dumped at landfill sites.
The project would also reportedly assist in alleviating the energy supply crisis faced in South Africa, by providing alternative base load supply.
Engineering, procurement and construction (EPC) contractor Lesedi had been appointed for both EPC and operations and management on the project.
The company said the capital expenditure requirement for the project was expected to be ZAR 180m, with financial close expected during the third quarter of 2022.
Following that, the construction phase was scheduled to start during the fourth quarter, with the project commissioning 11 to 14 months after that.
"Following the company's disinvestment from coal, we are excited to have signed our first waste to energy power purchase agreement that aligns to our strategy on advancing clean energy in the African market," said chief executive officer Louis Coetzee.
"The project is a first in a pipeline of projects under the Company's waste-to-energy portfolio, which we are proud to have worked on together with our partners, IGES."
Coetzee said that in the process of getting the agreement ready for signature, the company had done "a large amount of work" on procuring funding for the project, and had received a "higher than expected" level of interest from various institutions for the provision of project and debt funding, at "very competitive" commercial terms.
"With the signed power purchase agreement now in hand, the company finds itself in a very good position to advance these discussions with a view on finalising appropriate funding arrangements for the project in an expeditious manner."
At 1146 GMT, shares in Kibo Energy were up 17.76% at 0.19p.
Kibo Energy (KIBO)